WITH MICHAEL Jackson once again dominating the charts across the world in the days since his death, the earning power of the man who sold an estimated 750 million records has never been clearer. But Jackson left a mountain of debt behind him, and how the tangled web of his finances will unravel and who might benefit is far from clear.
There seems to be no doubt that Jackson was facing severe cash problems before he died. His former nanny Grace Rwaramba revealed to the Sunday Timesat the weekend that she had to use her own credit card earlier this year to pay for a birthday party for one of his children.
Jackson first ran into trouble in the 1990s, when the cost of maintaining the Neverland ranch with its zoo, cinema, fairground and miniature train, placed a severe strain on his finances.
"He had a tremendous burn rate of several million dollars a month running Neverland, shopping and going crazy, flying people all over the world. He kept borrowing against his asset base, and put himself in a deep cashflow situation," his former publicist, Stuart Backerman, told the Vancouver Sun. He also paid out $25.5 million (€18.14m) in out-of-court settlements with the families of boys who had accused him of child abuse. Meanwhile, the hits were no longer flowing, with diminishing returns from albums appearing four years apart.
In 1995, to ease growing pressure on his finances, he agreed to merge his prize asset – the Beatles song catalogue – with the library of his record company, Sony. Three years later, he had to take out a $140 million (€100m) loan with Bank of America secured against his 50 per cent stake in the joint venture, Sony/ATV.
Jackson's borrowings continued to swell, while his debt with Bank of America was sold on to the New York company Fortress Investment Group. Some reports have put his debts at the time of his death as high as $500 million (€356m), and while he hung on to his 50 per cent share of the Beatles rights, it is unclear who will get them now and whether his stake is worth the $1 billion that has been mooted. Sony/ATV takes in $300-$500 million a year from songwriting royalties, according to Rolling Stone.
Aside from his extravagance, Jackson’s big problem was that he had not put out any new material since 2001. Sony filled the gap with greatest hits compilations and special editions of his classic albums. Hopes for a new album were raised in 2006 when Jackson appointed Guy Holmes to spearhead efforts to come up with fresh material. The star found a benefactor in Sheikh Abdullah of Bahrain, who was reportedly prepared to bankroll his costs if he recorded the sheikh’s own compositions. But the deal came to nothing.
Musically, Jackson had become directionless, veteran DJ Paul Gambaccini argues. “Everything suggests it’s not just his real fans who bought the act, it appears as if he bought the act: he believed that he was the King of Pop, he believed he was still a major star even though in today’s marketplace he did not even have a presence. There was no new record for eight years and he seemed clueless about what to do next.” Given that the creative well seemed to have run dry, a return to live performance was Jackson’s best hope. Hence his intended comeback in a 50-date residency at London’s O2 next month which was expected to earn him up to $100 million.